DOHA – Amid the soaring political tensions in Pakistan, the InternationalMonetary Fund (IMF) on Wednesday delayed the revival of the stalled $6billion programme under the External Financing Facility (EFF) for Pakistan.
The revival of the programme was expected to bring stability to thefinancial markets, the fast-weakening Pakistani rupee and the depletingforeign exchange reserves.
On Wednesday, Pakistan failed to convince the IMF, as both sides could notreach a staff-level agreement despite week-long negotiations in Doha,Qatar, from May 18-25.
The IMF has emphasised in a statement abolition of subsidies on petroleumproducts and electricity, among other conditions, as a prerequisite forrevival of the programme.
Following the conclusion of the talks, IMF Mission Chief for PakistanNathan Porter said the Fund held constructive discussions with thePakistani officials to reach an agreement on policies and reforms.
“Mission has held highly-constructive discussions with Pakistaniauthorities aimed at reaching an agreement on policies and reforms thatwould lead to the conclusion of the pending seventh review of theauthorities’ reform programme, which is supported by an IMF Extended FundFacility arrangement.”
Porter said a considerable progress was made during the mission, includingthe need to continue to address high inflation and the elevated fiscal andcurrent account deficits, while ensuring adequate protection for the mostvulnerable.
The Fund also appreciated the State Bank of Pakistan’s (SBP) decision tohike the policy rate from 12.25% to 13.75% — a move made to control theincreasing inflation in the country.
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But Porter noted that on the fiscal side, there were deviations from thepolicies agreed upon in the last review, partly reflecting the fuel andpower subsidies announced by the authorities in February.
The PTI-led government had originally agreed on raising the price ofelectricity and petroleum products, but later in March, Imran Khanannounced subsidies on both commodities — and the current government iscontinuing with the same arrangement.
“The IMF team emphasised the urgency of concrete policy actions, includingin the context of removing fuel and energy subsidies and the FY2023 budget,to achieve program objectives,” Porter said in the statement.
The mission chief added that the IMF team looks forward to continuing itsdialogue and close engagement with Pakistan’s government on policies toensure macroeconomic stability for the benefit of all Pakistanis.
The Ministry of Finance, in a statement, said it would continuenegotiations with the Fund next week, while Finance Minister Miftah Ismailleft for Pakistan.
According to sources, the finance minister would speak to Prime MinisterShehbaz Sharif about abolition of subsidies on petroleum products.